Featured Article May 2002

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By Gerald F. PhillipsGerald F. Phillips, an attorney with offices in Century City, is a full-time mediator and arbitrator specializing in resolving large commercial disputes and controversies, including those arising in the entertainment industry. He also is an adjunct professor at Pepperdine School of Law. Phillips was actively involved in various capacities in four cases mentioned in this article: Allied Artists Pictures Corporation v. Rhodes, Interstate Circuit v. Dallas, Fortnightly Corporation v. United Artists Television, Inc., and United States v. Paramount Pictures, Inc. He was initially involved with Joseph Burstyn, Inc. v. Wilson but did not take part in the litigation of that case.

The Academy of Motion Picture Arts and Sciences customarily designates five nominees, in various categories, for the coveted Academy Award, the Oscar. In keeping with that spirit, five legal cases deserve nomination as the court decisions that have had the greatest impact on the motion picture industry. These cases are Allied Artists Pictures Corporation v. Rhodes,1 which upheld the constitutionality of state legislation regulating the licensing of motion pictures; Fortnightly Corporation v. United Artists Television, Inc.,2 in which the U.S. Supreme Court held that the importation by cable systems of distant signals did not constitute copyright infringement; Alden-Rochelle, Inc., v. American Society of Composers, Authors and Publishers,3 which decreed that, contrary to the law throughout the rest of the world, motion picture theaters in the United States are not required to obtain a performance right license for the music in the films that they exhibit; Joseph Burstyn, Inc. v. Wilson,4 which reversed a prior opinion of the U.S. Supreme Court that held that motion pictures were not protected by the First Amendment; and United States v. Paramount Pictures, Inc.,5 which required the major motion picture companies to divest their ownership in theaters and enjoined eight motion picture distributors from engaging in common trade practices.

All these cases are as vital today as when they were decided and will continue to affect the film industry. Is there one among the five that wins the award as the case that had the most significant impact of all? Most commentators would choose Paramount for that honor.

States Rights for Motion Picture WrongsAllied Artists Pictures Corporation v. Rhodes and its progeny had a significant impact on the industry in that they upheld the regulation of the distribution of motion pictures by states and other jurisdictions. Allied Artists upheld an Ohio statute prohibiting the practices of “blind selling” and “blind bidding,” which involve the licensing of a motion picture without affording an exhibitor the opportunity to view the film. Twenty-five other jurisdictions have passed similar legislation prohibiting these distribution practices. No such legislation has been passed in California or New York.

Blind selling is as old as the industry. In the 1960s, the National Theater Owners of America (NATO) began a campaign to stop distributors from blind selling and blind bidding by having the practices declared illegal and by barring distributors from obtaining guarantees and advances on film rentals. Theater owners argued that blind bidding required them to buy a pig in a poke and make substantial financial commitments without adequate information. The distributors countered by arguing that licensing motion pictures before they were completed enabled the distributors to share, to some extent, the huge financial risk of the films with the exhibitors. Further, if a film could not be licensed before it was screened by theater owners, the distributors often could not secure holiday play dates for it from the better theaters in a particular market because the theaters would license other distributors’ films that had been screened. The distributors pointed out that many other copyrighted works are licensed unseen, with guarantees paid in advance—such as in the book publishing industry and the record industry, in which authors and composers are often paid before they even sit down to write and compose.

In 1978, NATO lobbied successfully for the introduction of bills in various state legislatures to regulate the licensing of motion pictures. As each bill was introduced in a particular state, at the behest of the exhibitors in that state the Motion Picture Association of America worked to have the proposed bill defeated. However, the MPAA had little leverage with the state legislatures, and the statutes were passed in 24 states, as well as in Prince George’s County, Maryland, and Puerto Rico.

The state of Ohio passed the first anti-blind bidding statute in 1978, which also included provisions barring advances and guarantees—nonrefundable, minimum cash amounts that an exhibitor agrees to pay notwithstanding the eventual box office performance of a motion picture. The major motion picture distributors and other smaller companies brought suit against the governor and other state officials. In Allied Artists, the distributors attacked the statute on federal constitutional grounds, claiming that the law violated the First Amendment and placed an undue burden on interstate commerce in violation of the commerce clause. They also asserted that the statute violated the preemption provision of the Copyright Act. The district court upheld the statute, rejecting all the arguments advanced by the distributors. The opinion stated that nothing in the Constitution guaranteed the distributors an unfettered right to decide how to market their product or prevented the state from recognizing that the local theater operators were suffering undue economic hardship. The court also held that the state was not prevented from rectifying the imbalance between the distributors and the exhibitors.

The distributors appealed to the Sixth Circuit Court of Appeals, which held that the statute requiring the screening of motion pictures for exhibitors and establishing competitive bidding procedures does not violate the First Amendment, the commerce clause, the antitrust laws, or the Copyright Act. It did, however, remand the case back to the district court for further consideration regarding the validity of the statute’s prohibition against advances and guarantee payments.6 After further proceedings, the film industry also lost on these issues.

As a result of Allied Artists and cases in other jurisdictions that subsequently followed it, all distributors of motion pictures must adhere to the procedures for licensing films set forth in the statutes that are controlling in 26 jurisdictions. The statutes in most of the jurisdictions also prohibit the distributors of motion pictures from requesting or receiving an advance or a guarantee payment.

Screening Fire in a Crowded TheaterIt is best to consider Joseph Burstyn, Inc. v. Wilson in tandem with a later case, Interstate Circuit v. Dallas.7 Burstyn brought movies under the protection of the First Amendment, while Dallas held that a state or a city could regulate the dissemination of material to minors that may be considered obscene for minors though not for adults.

Astounding as it may seem now, before 1952 there were grave doubts that motion pictures were protected by the First Amendment. This unbelievable view was the direct result of the U.S. Supreme Court’s decision in Mutual Film Corporation v. Industrial Commission.8 In that 1915 case, the Court held that the free speech and free press provisions of the Ohio Constitution did not protect movies against government censorship. The Court reasoned that because the production, distribution, and exhibition of motion pictures was a large-scale business conducted for private profit, films did not come within the protection of the U.S. Constitution.

Burstyn was the first case after Mutual to present squarely to the Supreme Court the question of whether motion pictures are protected by the First Amendment. Joseph Burstyn, a distributor of foreign films, obtained the film The Miracle for distribution in the United States. The Motion Picture Division of the New York Education Department originally issued a license to a theater authorizing the exhibition of the film. However, as a result of an avalanche of letters, the New York State Board of Regents, which administered the New York Education Department, viewed the film, determined that The Miracle was “sacrilegious,” and ordered the Commissioner of Education to rescind the theater’s license to exhibit the film. Burstyn brought an action in New York state court to review the determination of the Board of Regents. The New York Appellate Division sustained the revocation of the theater’s license, but the U.S. Supreme Court reversed. In a unanimous decision, the Court also reversed the Mutual case and stated:We conclude that expression by means of motion pictures is included within the free speech and press guaranty of the First and Fourteen[th] Amendments. To the extent that language in the opinion in Mutual Film Corp. v. Industrial Commission…is out of harmony with the views here set forth, we no longer adhere to it.9

The Court, however, observed that “[i]t does not follow that the Constitution requires absolute freedom to exhibit every motion picture…” and there may be “exceptional” cases. This opened the door to the censorship of films held to be obscene. The Court did invalidate the term “sacrilegious” as the determinative factor in the denial of an exhibition license, noting that a censor would find it impossible to avoid favoring one religion over another.

The Dallas case, decided by the U.S. Supreme Court in 1968, involved the film Viva Maria. In 1965 the city of Dallas, Texas, established an ordinance that classified motion pictures according to their suitability for children. It required exhibitors to include the city’s ratings in all advertisements. The ordinance imposed criminal penalties on any theater admitting children under the age of 16, without a parent or guardian, to a film that the city had rated “unsuitable.”The Supreme Court announced two decisions on the day it handed down the Dallas opinion. In the other case, Ginsberg v. New York,10 the Court upheld a New York statute that regulated the dissemination of material—not including motion pictures—to minors that is obscene for minors though not necessarily for adults. Nevertheless, the Court in Dallas found that the Dallas classification ordinance was unconstitutionally vague.

The Dallas opinion gave birth to the Classification and Rating Administration (CARA), the film industry’s answer to the cry for laws to protect children from viewing films containing inappropriate material. CARA has been rating movies—based on language, sexuality, violence, and other elements—for more than 30 years. Following the lead of CARA, ratings for the protection of children have been implemented in the broadcast, recording, video game, and toy industries.

Cutting the Cable DealThe landmark ruling of the U.S. Supreme Court in Fortnightly Corporation v. United Artists Television, Inc. was the genesis of Section 111 of the Copyright Act of 1976, which provided that cable systems must pay a compulsory license for copyrighted films that are imported from a distant broadcasting station. In 1976 United Artists Television brought a test case against a cable company owned by the Fortnightly Corporation, alleging that the cable company infringed on the copyright to a motion picture when its cable system imported distant signals carrying the film. (This method of operation by a cable system should not be confused with the carrying of programs supplied by pay system channels such as HBO and Showtime, which must obtain licenses for copyrighted material.)

There were two basic reasons why the suit was brought. First, cable systems were showing copyrighted films and not paying any license fees. Second, the importation of the films depressed the market value of those films offered for license to local television stations, because the films had already been shown on cable systems.

United Artists believed that it had a very strong precedent in Buck v. Jewell-La Salle Realty Corporation,11 a unanimous opinion of the Supreme Court written by Justice Louis D. Brandeis. In that 1931 case, a hotel in Philadelphia received a broadcast signal from a radio station in New York and piped the music throughout the hotel. It paid no copyright fees. The Supreme Court held that the use of special equipment to extend a broadcast to a greater audience than the broadcast would otherwise enjoy was a “performance” of the copyrighted work.In Fortnightly, the Second Circuit Court of Appeals followed the Buck precedent and held that cable systems “perform” the programs.12 The Supreme Court, however, rejected the approach and reasoning of the Second Circuit. It held that the retransmission by cable systems of copyrighted motion pictures, imported by cable systems from distant stations into the local community, is not an infringement of copyright. The importation of a program by a cable system did not constitute a performance under the Copyright Act of 1909. The Court stated, “Broadcasters perform. Viewers do not perform.” The Court, based on this simplistic analysis, held that cable “falls on the viewer’s side of the line” and cable companies do not perform the programs that they receive. In order to accommodate its holding in Jewell-La Salle, the Fortnightly court limited its prior holding to the facts in that case.13 Cable was thus exempted from the copyright law with respect to its then primary activity of importing signals from distant markets.

In its ruling, the Supreme Court called upon Congress to act. Congress responded when it incorporated a complex Section 111—the cable copyright provision—into the Copyright Act of 1976. In passing the 1976 act, Congress stated (contrary to the holding in Fortnightly), “[C]able systems are commercial enterprises whose basic retransmission operations are based on the carriage of copyrighted program material and…copyright royalties should be paid by cable operators to the creators of such programs.”14 Thus, the ruling in Fortnightly regarding performance by cable systems was reversed legislatively. The 1976 act established a compulsory license for cable, permitting cable systems to retransmit primary transmissions made by broadcast stations only upon payment of a fixed, compulsory royalty fee to the U.S. Copyright Office. The fees are passed on to the copyright owners.

Cable systems have become potent industrial and political entities largely because Fortnightly did not require them to pay full copyright fees. Instead, Congress fixed the compulsory license fee at a noncompetitive rate, allowing the cable industry to become a major communications force. Cable television, greatly aided by Fortnightly, has revolutionized the motion picture and television industries.

Paying the Theatrical PiperWhen a theater exhibits a film, it is performing the film and the music contained therein. Under almost all circumstances, performers of music protected by copyright must obtain the right to publicly perform that music. The one exception is motion picture theaters in the United States, which do not have to obtain a performance right for the music in the motion pictures that are screened in the theaters. The theaters have the 1948 case of Alden-Rochelle v. American Society of Composers, Authors, and Publishers to thank for their exemption.In order to appreciate Alden-Rochelle, it is important to understand the function of performing rights societies. In 1914 it became evident that an individual music copyright owner could not negotiate licenses with all possible users of music. Likewise, all those who wished to perform compositions without infringing the copyright could not, as a practical matter, obtain licenses for all the music they would perform. To fill this void, several famous composers of music formed the American Society of Composers, Authors, and Publishers. Its members assigned to ASCAP their exclusive right to grant users the right to publically perform their works. ASCAP, acting on behalf of its members, monitors the public performance of music in its repertory, brings copyright infringement actions, and distributes to its members the royalties paid by licensees and foreign performing societies. The revenue collected by ASCAP is divided evenly between the publishers (as a group) and the composers and authors (as another group.) Broadcast Music, Inc. (BMI) was organized in 1939 by members of the broadcast industry to compete with ASCAP. A third entity, the Society of European Stage, Authors and Composers (SESAC), was formed in 1931. The three organizations license the performance rights to virtually every musical composition copyrighted in the United States.

Before the advent of sound motion pictures, any music designed to accompany the action in silent motion pictures was supplied by piano players or, at some theaters, by orchestras. Theater owners originally refused to pay any royalties to ASCAP for the right to perform the musical compositions for the films. In 1923, however, after ASCAP brought a series of infringement actions, theater owners began to obtain ASCAP licenses and pay an annual fee.

When the major film production and distribution entities were acquiring exhibition companies, some of them acquired music publishers as well. They soon discovered that it was in the financial interest of producers whose publishing entities were members of ASCAP to obtain only the synchronization right for music in a motion picture and not to seek to acquire the performing rights, thus leaving to ASCAP the licensing of performing rights to theaters. (The synchronization right is a separate right that must be acquired to incorporate music in synchronization to the other elements of a film.) The film exhibition agreements specifically provided that no right to perform the music was granted. The exhibitor was required to obtain an ASCAP license. The film companies that were members of ASCAP through their publishing companies then shared in the revenue paid by the theaters.

The power of ASCAP and its relationship to motion picture producers came under judicial scrutiny in 1942 in the Alden-Rochelle case when a group of 164 exhibitors (operating 200 theaters) filed an antitrust complaint against ASCAP. The case was finally tried in 1948 before U.S. District Court Judge Edward Leibell. The court held that almost every part of the structure of ASCAP and its licensing of theaters involved a violation of the Sherman Antitrust Act. The court found that motion picture producer/distributors, through their publishing subsidiaries, received 37 percent of the 50 percent allocated by ASCAP to its publishing members. This amount, the court stated, was the result of the exhibition agreements that were conditioned on an exhibitor obtaining an ASCAP license. The court said that the members of ASCAP, by pooling their rights and license fees, shared in the copyrighted work of each other. Combining the copyrights, according to the court, added to the monopoly of the copyrights in violation of the antitrust laws. The theater owners argued successfully that they should not be required to obtain a license from ASCAP but producer/distributors should obtain the performing rights when they acquired the synchronization rights to the music.15

The court designed an injunction to strike down the means by which ASCAP and film distributors were able to require theaters to obtain an ASCAP license. The court restrained ASCAP from 1) licensing the performance rights of any musical composition synchronized with a motion picture when the musical compositions are performed in a theater, 2) refusing to grant to producers the right to perform the music in motion picture theaters when ASCAP licenses the synchronization right to the music to the producers, 3) conspiring with producers to include a clause in exhibition agreements that required exhibitors to obtain a license from ASCAP, and 4) splitting the synchronization and performing rights of a musical composition; both rights must be assigned to a producer at the same time. The court’s action effectively meant that exhibitors would not need an ASCAP license.

Alden-Rochelle has had an important impact on the production of motion pictures and on all theaters in the United States. Producers must obtain a license for the U.S. theatrical performing right for the music in their motion pictures. The cost paid by producers for this right is usually a sum equal to the amount paid for the synchronization right—and this has added to the production cost of motion pictures. The studios (by virtue of the membership of their publishing subsidiaries in ASCAP prior to Alden-Rochelle) received a portion of the money paid by theaters for a theater’s right to perform the music in films. Producers no longer receive this revenue and do not charge exhibitors any separate fee to cover the performing rights. Thus, the operating costs of theaters are reduced.Alden-Rochelle has had one more impact. Unlike their American counterparts, theaters throughout the world pay a performance right when they exhibit a film (usually based on the number of seats in a theater or on gross receipts.) The fact that theaters in this country do not pay performing rights societies for the right to perform music has presented negotiating problems for the U.S. collection societies when they are dealing with their foreign counterparts. The concept of licensing at the source—in this instance, the motion picture producer—as required by Alden-Rochelle is limited to theatrical performance. The ruling has not been applied to the licensing of films to television. The efforts by the networks and local stations to expand mandated source licensing have failed.Breaking Up Is Hard to Do

United States v. Paramount Pictures, Inc.—commonly referred to as the Paramount case—is the landmark case that restructured the motion picture industry. It broke the nexus between distribution and theaters but left production and distribution connected. It enjoined eight distribution practices. Paramount is not only the most significant case affecting the motion picture industry from a historical perspective but it is also key to understanding the wave of mergers that is transforming the entertainment industry today. Only the future will reveal the full extent of Paramount’s continuing impact on this industry.

In 1938 the federal government filed an antitrust suit against the eight dominant motion picture companies. The so-called five “majors”—Paramount Pictures, Inc. (the largest theater owner and the first defendant listed), Loew’s Inc. (a theater company that owned Metro-Goldwyn-Mayer), Warner Bros. Pictures, Inc., Twentieth Century Fox Film Corporation, and Radio Keith Orpheum Corporation (RKO)—were vertically integrated in that they each owned large theater chains. Two defendants—Columbia Pictures Corporation and Universal Pictures Corporation—only produced and distributed films. The final defendant—United Artists Corporation—was only a distributor. The latter three companies were referred to as the “minors” or the “little three.” The majors were charged with combining and conspiring to restrain trade in the production, distribution, and exhibition of motion pictures. The minors were charged with combining and conspiring with the majors and with each other. The Department of Justice sought the divorcement of production and distribution from exhibition as well as injunctions enjoining various distribution practices. The Justice Department was propelled by prior Supreme Court decisions involving the industry, complaints by exhibitors who urged the government to bring the antitrust case, and opinions rendered in private antitrust suits brought by exhibitors against these same companies.

On November 20, 1940, before trial, the majors entered into consent decrees. The case against the minors was adjourned. The consenting distributors were enjoined from licensing films until they were shown to exhibitors and from licensing a group of more than five films. The decrees also required complaints by exhibitors against distributors to be arbitrated by the American Arbitration Association. On August 4, 1944, the Justice Department reactivated the litigation. It asserted that the consent decrees hardly attacked the roots of the conspiracy. The three-judge district court—a statutory court whose decisions could be appealed directly to the Supreme Court—found that the evidence had established “various infractions of the Sherman Act on the part of each of the defendants.…” It stated, however, that it would not bar the distributors from owning theaters. Instead, it enjoined the defendants from licensing their films for exhibition without offering licenses through a mandatory system of competitive bidding.

The Department of Justice and each of the defendants appealed to the Supreme Court. The government urged the Court to hold that vertical integration of production, distribution, and exhibition was illegal per se. The Court declined, holding that the legality of vertical integration turned on the purpose or intent with which it was conceived or the power it created. Because these factors had not been considered by the district court, the Supreme Court set aside the lower court’s finding of monopoly. The Court’s holding that integration was not illegal per se has no doubt played an important role as film companies have in recent years combined with television companies, cable systems, and cable programmers.

The Supreme Court did sustain almost all the findings made by the district court. However, it found that the system of competitive bidding ordered by the district court was not an adequate or proper remedy and remanded the case “so that a more effective decree may be fashioned.” The court believed that competitive bidding played into the hands of the theater with “the longest purse.”16After the Supreme Court sent the case back down, the district court held that “the vertical integrations were a definite means of carrying out the restraints and conspiracies” and concluded that divorcement was “the only adequate means of terminating the conspiracy and preventing the resurgence of monopoly power.…”17

Sensing what was to come, RKO and Paramount (in 1948 and 1949, respectively) each agreed to divest themselves of their theater interests in the United States, which were placed in new exhibition entities independent of the distribution companies. The new distribution entities were enjoined from eight trade practices. The district court ordered the three remaining integrated companies (Warner, Fox, and Loew’s) to submit plans for divorcement. These three companies again appealed to the Supreme Court, which affirmed the judgment of the district court. Columbia, Universal, and UA did not appeal and entered into consent decrees that only enjoined them from the eight distribution practices. After the Supreme Court affirmed the lower court’s decision, Fox, Warner, and Loew’s entered into consent decrees similar to those of RKO and Paramount. Stringent restrictions, however, were placed on Warner, Fox, and MGM (the production/distribution entity that was formed as a result of the Loew’s divorcement) regarding the future acquisition of theaters. The Paramount and RKO decrees did not bar the future ownership of theaters.

In 1987 Warner sought an order modifying its consent decree to permit it to acquire a half interest in an exhibition company owned by Paramount. Judge Edmund Palmieri of the Southern District of New York, who was assigned to monitor the consent decrees, granted the motion but only in part.18 He refused to permit the return of integration, and Warner appealed. The Second Circuit Court of Appeals reversed and held that the proposed ownership by Warner would not restrain competition, scuttling the part of the decrees concerning the ownership of theaters.19

The consent decrees included eight injunctions that applied to all eight defendants. The first enjoined the companies from fixing the admission prices to be charged by theaters. Both the district court and the Supreme Court relied on the fact that the admission prices were fixed pursuant to conspiracy. Two injunctions enjoined the distributors from maintaining a system of clearances (the period of time stipulated in license contracts that must elapse between runs of the same feature within a particular area or in specific theaters) and from granting clearances between noncompetitive theaters or for a longer time than is reasonably necessary to protect the licensee granted the clearance for a particular run. Clearances are no longer granted and, therefore, the injunctions relating to clearances are only of historical interest. Also of limited academic interest are the injunctions that enjoined the making of franchise, formula, and master agreements.

The decrees enjoined the distributors from “block booking”—that is, conditioning the licensing of one film upon the licensing of one or more other motion pictures. The Supreme Court held the practice of block booking to be illegal because it “prevents competitors from bidding for single features on their individual merits” and because it “added to the monopoly of a single copyrighted picture that of another copyrighted picture which must be taken and exhibited in order to secure the first.”20

The clear statement in the Paramount case that block booking is illegal had a direct impact on the licensing of films to television. In 1957, the government brought six civil antitrust actions, consolidated for trial as United States v. Loew’s Inc.21 The complaints alleged that the defendants had engaged in block booking in their licensing of films to television stations. U.S. District Court Judge William B. Herlands held that each of the defendants violated the Sherman Antitrust Act by block booking films to television stations. Each of the final judgments entered in that case enjoined the defendant from conditioning the licensing of one or more films on the licensing of any other film. However, each judgment added an important proviso that permitted the defendant to defer licensing to a customer while the defendant was simultaneously negotiating with a competing station that was negotiating for a larger number of films. The judgments required that the defendants offer each film individually and separately priced.

The most pervasive injunction of each of the Paramount decrees enjoined the distributor from licensing any feature in any manner other than one in which each license was “offered and taken theater by theater, solely upon the merits and without discrimination.” The Justice Department consistently maintained that this meant that a distributor was required to afford every comparable theater a competitive opportunity to license each of its motion pictures. However, in December 1988, the Justice Department expressed a completely contrary view. It stated that as long as a selection of a preferred exhibitor is the result of a distributor’s prior determination of the merits of each theater and is not a cover-up for conduct that would be unlawful, such a selection is lawful.

One of the reasons that the impact of the Paramount litigation is so profound is that it enabled the minor defendants (Universal, Columbia, and UA) to prosper and to more effectively compete against Paramount, Warner, Fox, and MGM. It created an open market in which Walt Disney could form his own distribution company in 1953. It was one of the factors causing the end of the “star system” because, as a result of the divorcement, the studios did not have the need to fill their own theaters. A direct consequence of the demise of the star system was the rise of the independent producer. Moreover, Paramount permitted the theaters formerly controlled by the majors to exhibit foreign and independent films that previously could not be exhibited if the distributing company could not obtain an MPAA Code Seal of Approval. Finally, it enabled theaters that were not part of a chain as well as smaller theater circuits to more effectively compete against the larger circuits, because the distributors were required to license their films to theaters on the merits of each theater and could not prefer the larger customers.

The distribution injunctions are still in place. In 1985 the Justice Department advised Judge Palmieri that, after an investigation of the decrees, it had decided not to seek their modification or termination. It further advised the court that the distributors subject to the decrees were not prepared to file motions seeking termination of the decrees or to demonstrate to the court that terminating the decrees would be in the public interest.

The future will reveal the full and precise impact of Paramount on the multitude of mergers in the entertainment industry. Certainly the Supreme Court’s ruling that integration is not illegal per se (contrary to government urging) has permitted companies to integrate. The Paramount decrees were actively enforced between 1950 and approximately 1990, when the Justice Department generally became less active in the enforcement of antitrust laws. While each of the Paramount defendants is still subject to the consent decrees, the question remains to this day whether the Justice Department will enforce them or allow them to remain dormant.

SidebarRounding Out the Top TenThe Oscars may be limited to five nominees, but with apologies to David Letterman, the Top Ten list of the most significant cases affecting the motion picture industry would likely include these additional five cases:P Desny v. Wilder,1 in which the California Supreme Court, acknowledging that ideas are not protectible by copyright, held that the conveyance of an idea, even though it is not novel or concrete, may be protected by contract and thus merit compensation.P Sony Corporation of America v. Universal City Studios,2 which held that the manufacture and sale of home video recorders do not constitute copyright infringement.P United States v. Capitol Service, Inc.,3 which held that agreements among exhibitors to allocate films among themselves are illegal per se.P Abend v. MCA, Inc.,4 the Rear Window case, which held that the exhibition of many classic films may be prevented if the underlying literary rights are not obtained from the estate of the original author during the copyright renewal period. The Copyright Act of 1976 legislatively reversed this opinion.P Buchwald v. Paramount Pictures Corporation,5 which held that seven provisions of the standard industry definition of “net profits” are unconscionable. The case was settled before any opinion was reached on appeal.—G.F.P.